The media and academia are continuously obsessed with “gaps” and “disparities” in income. As one talk show host put it, “It makes no sense” that a corporate executive makes over $50 million a year.
Ninety-nine percent of all the things that happen in this world “make no sense” to any given individual. Do you understand how your automobile’s transmission works? Could you repair it if something went wrong?
Do you understand how aspirin stops headaches? How to make yogurt?
Years ago, a famous essay pointed out that nobody knows how to make a simple lead pencil. That is, there is no single individual anywhere who knows how to grow the wood, mine the graphite, produce the rubber, and manufacture the paint.
Complex economic processes cause all these things to be done and coordinated by a wide variety of people, just in order to produce something as simple as a lead pencil. Multiply that by a hundred or a thousand when it comes to the complexity of producing a car or a computer.
If you cannot understand something as simple as making a lead pencil, why should you be surprised that you don’t understand why someone is making a lot more money than somebody else?
Moreover, if this obsession with income disparities is to be something more than mere hand-wringing or gnashing of teeth, obviously the point is that somebody ought to “do something” to change what you don’t understand.
Usually that means that the government – politicians – should impose policies based on your ignorance of what is going on. Can you imagine anything more dangerous than allowing politicians to decide how much money each of us can earn?
Of course, such political control of incomes is usually advocated only to deal with “the rich.” But, when income taxes were imposed in the early 20th century, they applied only to “the rich” and they took a very small percentage of their income.
Once the floodgates are opened to this kind of political power, however, we have seen with the income taxes that they not only spread far beyond “the rich,” they took a serious share of even middle class incomes.
Moreover, the income tax has spawned an intrusive bureaucracy, creating so much complexity and red tape that millions of ordinary citizens have to go get some accountant to fill out the forms for them – and then sign under penalty of perjury that it was done right.
If you knew how to do it right, you wouldn’t have to go to somebody else to have it done, would you?
Incidentally, it took a Constitutional amendment to enable the federal government to impose an income tax. The people who wrote the Constitution were wise enough to understand what a dangerous thing it would be to allow government to take money from people just because those people had it.
Unfortunately, “progressives” were foolish enough, or envious enough, to single out “the rich” for a process that would inevitably spread across society and become insatiable in its demands.
Today’s “progressives” want to expand political control of incomes even more. They call it “social justice” but you could call it Rumpelstiltskin and it would still mean politicians deciding how much money each of us can be allowed to have.
It is also worth noting that the people who are said to be earning “obscene” amounts of money are usually corporate executives. There is no such outrage whipped up when Hollywood movie stars make some multiple of what most corporate executives make.
This is social or ideological bias added to envy and ignorance. It makes quite a witches’ brew on which to base national policy.
Lofty talk about “social justice” or “fairness” boils down to greatly expanded powers for politicians, since those pretty words have no concrete definition. They are a blank check for creating disparities in power that dwarf disparities in income – and are far more dangerous.
Thomas Sowell is a senior fellow at the Hoover Institute and author of Basic Economics: A Citizen’s Guide to the Economy.